Whether you are starting a new business or seeking a new location for your existing business, it is important that you understand the lease process before you enter any negotiations with potential landlords. Location may be the most important factor, initially, to the success of your business; however, the terms of the lease you enter into could make or break you down the road. Never sign the landlord’s Standard Lease Agreement. Always negotiate for the most favourable terms that you can get.
Before you even begin looking at desirable locations for your business, you should already have analyzed your needs and determined your space requirements as well as the amenities and services you will need your landlord to provide for the successful operation of your enterprise. This will prepare you for the lease negotiation process. Once you start looking at potential properties, before you talk to the landlord, interview some of the other tenants to get an idea of tenant satisfaction, the history of the property, and landlord performance.
Once you have determined the square footage, the layout, and other needs that your commercial space must meet, you are ready to begin touring properties and comparing them. Having a list of several candidate properties strengthens your negotiating position and can result in significant cost savings. Use the results of your careful analysis and investigation to prepare and submit a Request for Proposal from each contender. This RFP and the resulting proposals will become the basis for your lease negotiations. Your leverage in the pending negotiations will be greatly reduced if liability limitations, options to extend or terminate, security deposit considerations, and other significant items are not included in your proposal.
At this point, you may wish to procure the services of an agent or attorney to aid you in the negotiation process. The experience that a professional negotiator can bring to the table could prove invaluable as you sit down with a potential landlord to talk terms. Be sure to discuss with him the terms that are not negotiable and ask him to review your RFP and propose changes.
Tailor your proposal to the unique needs of your particular business. You may want to include language that prohibits the landlord from leasing to objectionable tenants, for instance. Take a close look at how other tenants are using utilities. If utility meters are shared, adjustments may need to be made. Think carefully about the best month for your lease to terminate, what access you will have to the property, security that may be provided, adding additional space, rent increases, late charges, maintenance and repairs, insurance costs, property taxes, and so forth. Make your proposal simple and straightforward but spell out, in detail, each provision so that there are no misunderstandings in the terms of the final contract.
When the final lease contract is drafted, either by you or the landlord, be sure that everything that you asked for and reached agreement on is included and have your attorney review it before signing. An agreement reached through careful and amicable negotiation will benefit both parties and lead to a satisfactory relationship between you and your landlord for the life of your lease and beyond. It can and should truly be a win-win proposition.